There's no single right answer to this.
Ask yourself a few questions though:
- Is your career area likely to suffer over the next couple of years? - if so, how seriously, and might your job be under threat?
- If you lost your job, would you be entitled to substantial redundancy payments?
- do you have a spouse or partner whose job is highly secure or under threat?
- If you do have a spouse /partner, could you live on one salary?
- Are you an "it's there, so I might spend it" kind of person?
- What is your mortgage rate? Are there any penalties for paying off early?
- Are you saving regularly at the moment?
If you think there is a medium to high risk that either you or any partner might lose your job, and especially if you have no other savings or would have limited or no entitlement to redundancy payments, then I would put in in a high-yielding deposit account [check out the financial best buys forum]. This applies unless you are sure you won't have the discipline to leave it there - better to pay it off the mortgage than fritter and still not have an emergency fund!
If you feel that your job(s) are very likely to be secure, and you have a high mortgage rate (4.5% +) but no penalty for paying off early, I'd look at paying at least some of it off the mortgage - but would probably keep an emergency fund of not less than €5k in a high-yielding deposit account. More, if you're not saving regularly at the moment.
If your mortgage rate is low (3.5% or under), and you're confident of your ability to leave the money alone, you're probably best off by putting it all in one of the high return deposits, as even after DIRT the return on funds is greater than the interest you would save by paying capital off the mortgage.
There are few absolute right or wrong answers, but if you answer those questions to yourself (and be honest with yourself - if €20 k is going to be a terrible temptation, admit it. You're the only one who needs to know the answer!), it might give you better focus for your decision.
And it's not a bad position to be in, whatever way the decision goes.